Unfortunately, nearly one-third of all 1031 exchanges fail. This is partially due to tight IRS deadlines for identifying and completing a 1031 tax deferred exchange transaction. It is also due to today’s challenging lending environment and fierce competition among institutional buyers for high-quality commercial properties.
The best way to have a successful 1031 exchange is to have a plan, and start the process early. Since your replacement property must be identified in writing within 45 calendar days from the sale of your relinquished property, you should start shopping early in the process. That way, you can have your replacement property lined up by the time your relinquished property sells. You should also have a backup, just in case things don’t go according to plan.
Your ability to find suitable replacement property will depend on your particular situation. One of the most challenging situations is when an exchanger has a high degree of leverage. In order to defer capital gains taxes through a 1031 exchange, you must purchase replacement property of equal or greater value than what you sold. Since today’s lending environment tends to be more conservative than in years past, accomplishing this requirement can be challenging. Fortunately, we have access to commercial real estate with in-place financing, national credit tenants and long-term NNN leases to address this need.
The key is to have a go-to team that can help you find solutions for your particular 1031 exchange replacement property needs.
Contact us for more information. We're all about helping our clients find the best possible 1031 exchange replacement property solutions...